Moneris Fills a Gap With Its Pending Humboldt Acquisition

Merchant acquirer Moneris Solutions Inc. reported on Thursday that it has an agreement with the federal government to buy the assets of Humboldt Merchant Services, a Eureka, Calif.-based acquirer with nearly $2.5 billion in annualized charge volume, 18,000 merchants concentrated in California and other western states, and a strong network of independent sales organization relationships, according to its buyer. The Federal Deposit Insurance Corp. assumed control of Humboldt when its owner, Reno, Nev.-based First National Bank of Nevada, failed in late July. Mutual of Omaha Bank bought some of the bank's assets, but not Humboldt. “Obviously, the FDIC has no desire to run a merchant business,” says Greg Cohen, president of Schaumburg, Ill.-based Moneris Solutions Inc. Cohen wouldn't say how the sale came together, but he reports that Moneris had already been talking with First National of Nevada about buying Humboldt before the failure, as the bank tried to bolster is liquidity and avoid receivership. “Nobody made it to the finish line on time,” he says. But even though the sale isn't final, Moneris's U.S. bank sponsor and affiliate, Chicago-based Harris N.A., already is sponsoring Humboldt merchants and ISOs into the Visa Inc. and MasterCard Inc. networks. Neither the FDIC nor Moneris would disclose the purchase price. An FDIC spokesperson says the price won't be disclosed until the deal closes in 60 to 90 days. With Humboldt, Moneris fills a geographic hole, says Cohen. Moneris Solutions Inc. is the U.S. subsidiary of Toronto-based Moneris Solutions Corp., a joint venture of the parent companies of Royal Bank of Canada and Bank of Montreal. Moneris has a strong presence on the East Coast through Royal Bank's North Carolina-based U.S. unit, RBC Bank, formerly Centura Banks. And through Harris, which is owned by Bank of Montreal parent BMO Financial Group, it has broad reach in the Midwest. “This gives us a presence on the West Coast and the Southwest,” Cohen says. In addition, Humboldt brings to Moneris 150 to 200 ISOs and independent contractors, some as small as one to five employees, according to Cohen. Big acquirers highly prize such ISO and contractor relationships nowadays because they are good sources of high-margin small-business accounts. Mom-and-pop retailers and other small merchants account for most of Humboldt's portfolio, which also includes some e-commerce merchants. The Humboldt name will survive, and “the majority” of Humboldt's approximately 100 employees will be offered jobs with Moneris, Cohen says. “We're extremely fortunate to be partnering with a company that has a similar culture to what we have, but separate core competencies,” says Ken Musante, president of Humboldt Merchant Services. “Our service standards are the same.” Musante will continue to lead the Humboldt operation after the deal closes. Humboldt uses First Data Corp. for basic processing, and has a good set of risk-control and other proprietary products, according to Cohen. With the acquisition, Moneris plans to integrate Humboldt's services with its own front-end system. “It allows us to take our products out through their distribution [channels],” says Cohen, adding that Humboldt's charge volume is growing by about 20% a year. Moneris Solutions Corp. doesn't break out is U.S. volume, but says it has 350,000 merchants in North America and does $250 billion in annualized charge volume.